Paul Holmes 30 Oct 2006 // 12:00AM GMT
It goes against every instinct of a professional service firm manager, but sometimes the best business development strategy involves firing a client.
The notion that the “customer is always right” is deeply ingrained and deeply misguided—in the professional services sector in particular. The reality is that most counseling firms need talent more urgently than they need new business, because good people attract good clients much more assuredly than good clients attract good people.
The best firms periodically review their client relationships. First, to make sure that the firm is providing a satisfactory level of service (although in reality, satisfactory is rarely sufficient in today’s competitive environment) but second, to make sure the client is not behaving in such a way that it might undermine the firm’s relationship with its staff.
Good firms need to constantly ask several questions about every client relationship.
First, is it profitable? (It’s amazing how many are not, and are justified on other criteria, from prestige to the keep top-line numbers high.) Second, does the client see us as a partner rather than merely an order-taker? And third, does the client treat us with respect.
It’s amazing how often the answer to all three questions is the same. And if a client isn’t profitable, doesn’t see the firm as a partner, and treats people like dirt, that client is almost certainly destroying more value than it’s creating.
Under those circumstances, firing a recalcitrant client can have an amazing positive impact on employee morale. But there are other situations in which a firm needs to proactively terminate a relationship that’s no longer working, one of which is described in Alan Kelly’s new book, The Elements of Influence (reviewed in these pages last week).
In the following extract from the book, Kelly—formerly chief executive of high-tech public relations specialist Applied Communications—explains (in terms related to the “playmaking” methodology described in the book) how he severed the firm’s relationship with one of its largest and longest-standing clients.
It describes a play that Kelly calls a “Pass,” which “embodies the principle of strategic withdrawal. It’s a move that helps players make smart decisions about staying with or getting out of a marketplace…. When the decision is to get out, the well-run Pass helps players pull back rationally and to consolidate and refocus resources intelligently, rather than just surrender them.”
According to Kelly, writing in The Elements of Influence:
“Clients, of course, have sacred importance to a professional services firm, and to my consultancy, this was never an exception. But in the rough-and-tumble high technology industry, where we prospered for more than a dozen years, the expectations and treatment by the well-caffeinated, well-financed, and hyper-ambitious professionals of Silicon Valley created more than the usual share of challenges to firms like mine.
By and large, we rolled with the punches and were thankful to be involved in work that often had historic implications for doing business and living life. A key to this existence was in navigating the many management changes that regularly befell our technology clients, whether established Goliaths or start-ups. Turnover for any position was roughly eighteen to twenty-four months, so change was a constant in the extreme.
Consequently, when the executives who commissioned us were moved up or out, their chairs were filled with new faces, usually with their own ideas of what to do, where to go, what plays to run, and who to have on their team. This was all quite reasonable, except for the last part—whom to have on the team—because new blood often meant new consultants, too, irrespective of the accomplishments and trustworthiness of those they sought to replace. Such is life.
Often, we saw these changes coming, and in one ominous case, it was obvious that a new team would soon be marched in. From the executive assistants to the retained consultancies (mine being one), a new approach and new leadership was in the air. Senior executives with whom we still had close ties told us as much: There would be a full and thorough housecleaning. Watch out.
For my group, this was mind-boggling news. Our results, aided by the playmaking philosophy, were by any measure exceedingly strong. You’d think we’d earned our keep. But two engulfing political waves were still coming our way: First, we’d been told that a large share of the account would immediately be put up for bid, offered to us officially and, to our chagrin, our archrivals. Second, with our client’s new organization presumably set and gathering momentum, we could also see that over the coming months, the rest of the business would be put on the block. However well we had performed, our days were numbered.
The choice, given to us by our shift¬ing client, was to compete for the business—what we believed was a disingenuous courtesy—and to take our chances from there.
It’s perhaps indelicate to suggest that we ever ran a play on our client. But a lesson in this book and a reality of playmaking is that players run plays on opponents, allies, and independents alike. There are no exceptions that I am aware of. They have to, by necessity, to move their position or agenda forward in a marketplace because no player, however friendly, shares the same objectives or values of another.
Could we have taken our lumps and run a Bear Hug to preserve our good reputation? Yes, but the new client-side team wasn’t planning to just let us go. By all appearances, their plans for us looked more like indentured servitude than a fair business deal: Milk them. Pick off their stars. Dump them. This friend had turned into a foe, so the complexion of our relationship with the turning client had to change too.
Usually, our playmaking skills were reserved for our client’s competitors, but this was a fate we didn’t deserve and our sources were assuring us that the new management team would quickly implode. It would amount to a mere management spasm, they said. Soon, all would return to normal. For you, maybe, we thought. But what about us? From this perspective, it was clear that I could either help my new enemy get off the ground or help it self-destruct. All told, we had no choice but to run plays on our dear client, to force its hand, and maybe, just maybe, get the business back.
Our decision, after a good deal of consultation with insiders, advisors, and my own exhausted and disheartened staff, was not to fight the change but, in fact, to accelerate it. Our overarching alpha play was a Preempt, a stratagem dedicated to beating a rival to the punch, and our underpinning beta play was a Pass, in this case a swift and categorical exit from the relationship.
Of course, our client’s new A-Team expected us to compete for the business. They’ll be desperate for it. They’d have to be. But we knew too much. The likelihood that we’d quickly lose it all to another consultancy was high, and surely our time was better spent looking for good new accounts rather than to try to continue working with a bad one. We needed a strategy that allowed us to take matters into our own hands because self-determination seemed the best means by which we might recover, rally, and prosper.
With the buy-in of my staff and unbeknownst to our waning client and chafing competitors, I presented to the client a letter that invoked the termination clause of our contract. I hadn’t resigned the part of the business we thought we’d lose. In fact, I’d resigned it all, and by my own doing I’d started the clock that would tick down to our last required day and a cold-turkey departure.
Instead of preparing a certain and futile pitch during the termination period, we went about the business of transitioning the client’s various projects and assignments, and most important, we stepped up our outreach to replace the lost business. It was a thrilling, though dangerous, decision but our destiny was at last in the hands of a player we trusted—ourselves.
The Pass that we ran—the wholesale resignation—triggered an entertaining series of movements by the client and our now wide-eyed competitors. It forced the new management team to accelerate its plans to switch consultancies. It also caused the bidding firms to ratchet up their own pitching engines and, perhaps, to get a little too excited. Did you hear? The whole account’s up for bid! Call New York and tell ’em we need resources.
To do such things to a client seems somehow professionally sinful. But the client—or this iteration of it—was playing with its own rulebook, and we knew it. We had no choice but to make decisions that were not in our mutual interest. On their terms, we were being pushed off a cliff, so we placed the bet and proceeded on ours. To our relief and surprise, we soon replaced most of the lost business and we watched, wide-eyed and with secret hope, as our now former client’s new organization began to unravel.
Leading up to our departure, they’d raised expectations to an impressive height, but now they’d been pressed into duty too fast. Their solutions to fill the void were suddenly overpromised and already being underachieved. And, sure enough, just as our insiders predicted, the team never got off the ground, in part because we refused to stay and help them.
Months after resigning the business, we got a call from our old client. New management was in place. The new players wanted to get back on the offense and they wanted us—no others—to help them do it. In a few weeks, we had in our hands a new contract that awarded us a bigger budget, a better partnership, and a fresh start.
We were back in, and just as important, our rivals were out—hunting again for the business they thought they’d landed. Playmaking is, let’s remember, a game of relative competitive advantage, so it was doubly useful (if not sweet) to have back what our competitors had hoped to steal.
In most cases, the Pass is designed to move a player along, to reallocate resources from one competitive setting to another. In this case, it was done with sufficient speed and determination that it also created a safe and improved avenue for returning to the marketplace we’d been forced to abandon. Our master strategy, to Preempt our unexpected adversary’s plan, had worked, perhaps to our surprise. And the Pass had exceeded our wildest dreams.
There are times to fight in a marketplace. There are times to move along. But that doesn’t mean that in leaving one shouldn’t also run plays. Running a smart Pass can preserve a player’s resources and reputation and, sometimes, even get back for the player what it had to give up. I should know.